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macroeconomics

Questions and Answers of Macroeconomics

The Phillips curve is _____________________ at higher rates of inflation and lower rates of unemployment.
The Phillips curve suggests that at lower rates of inflation, the rate of unemployment will be _____________________.
If output prices rise but money wages do not go up as quickly, real wages will _____________________, tending to _____________________ unemployment.
The Phillips curve describes a short-run tradeoff between _____________________ and _____________________.
If each possible good were indexed to changes in the general price level, would it be easy for relative price changes to signal changing relative scarcities? Why or why not?
What are the problems associated with targeting a zero rate on inflation?
What are the arguments for and against inflation targeting?
How does credibility impact inflation?
What is a political business cycle? What are the possibilities for conflict of interest to arise?
What impact do lags have on discretionary fiscal and monetary policy?
Which of the following statements is true?a. Most economists think that unemployment will remain close to the natural rate of unemployment in the short run.b. For many economists, monetary policy’s
Which of the following statements is true?a. Activist economists believe that discretionary macroeconomic policy can make the economy less unstable.b. One of the advantages of monetary policy rules
Indexinga. is a process of adjusting payment contracts to automatically adjust for changes in the price level.b. can reduce the impact of inflation on the distribution of income.c. may intensify the
Indexing is a method of fighting inflation bya. tying monetary payments to changes in price indexes.b. lowering the level of the consumer price index.c. keeping prices from rising above
The primary purpose of indexing is toa. lower the inflation rate.b. reduce the social costs of inflation.c. help the government maintain wage and price controls.d. All of the above are primary
Under the Taylor rule, the federal funds rate would be increased by half a point whena. real GDP exceeds target real GDP by 1 percentage point.b. target GDP exceeds real GDP by 1 percentage point.c.
Could indexing reduce the costs of inflation?
Should central banks target inflation?
Should monetary policy use a rule or discretion?
Are fiscal and monetary policies effective?
Why do expected rainstorms have different effects on people than unexpected rainstorms?
Even if individuals could quickly anticipate the consequences of government policy changes, how could long-term contracts (e.g., 3-year labor agreements and 30-year fixed-rate mortgages) and the
In a world of rational expectations, why is it harder to reduce unemployment below its natural rate but potentially easier to reduce inflation rates?
Why can the results of rational expectations be described as generating the long-run results of a policy change in the short run?
Why could an unexpected change in inflation change real wages and unemployment, while an expected change in inflation could not?
What is rational expectations theory?
Which of the following statements is true?a. A correctly anticipated increase in AD from expansionary monetary or fiscal policy will not change real output, employment, or unemployment in the short
If the rational expectations theory is accurate, equilibrium real GDP will change in the short runa. whenever the aggregate demand curve shifts.b. only if discretionary fiscal policy is used.c. only
With rational expectations, a policy that would increase AD would lead toa. higher inflation and lower unemployment in the short run if people underestimated the effect of the policy on inflation.b.
If an increase in the growth rate of AD leads to an increase in real GDP in the short run, the increase in AD could have beena. correctly anticipated.b. greater than anticipated.c. less than
If expectations are rational, can fiscal and monetary policy control real output?a. Yes, provided policies are announced in advance.b. Yes, both policies are effective in altering real output in the
According to the rational expectations view, the government can change real outputa. with appropriate, well-publicized fiscal and monetary policies.b. with appropriate, well-publicized fiscal and
If expectations are rational,a. a predictable change in inflation can make the expected inflation rate deviate from the actual inflation rate.b. unemployment can exceed the full-employment rate even
According to rational expectations, if workers and firms forecast inflation accurately,a. the real wage will not decline as the price level rises.b. workers will not lose from inflation, and firms
What do critics say about rational expectations theory?
What is rational expectations theory?
What does the long-run Phillips curve say about the relationship between macroeconomic policy stimulus and unemployment in the long run?
Why would inflation have to accelerate over time to keep unemployment below its natural rate (and real output above its natural level) for a sustained period?
Why is the economy being on the long-run Phillips curve equivalent to its being on the long-run aggregate supply curve?
Why would you expect no relationship between inflation and unemployment in the long run?
Is the Phillips curve stable over time?
If the actual unemployment rate exceeds the natural rate of unemployment, there will be a tendency towarda. increased inflation and a leftward shift of the short-run Phillips curve.b. decreased
As the economy moves up and to the right along a short-run aggregate supply curve, ita. moves up and to the right along the short-run Phillips curve.b. moves up and to the left along the short-run
The short-run Phillips curve could shift to the right as a result of either _____________________ or _____________________.a. rising oil prices; increasing inflation expectationsb. rising wages;
Which of the following would shift the Phillips curve to the left?a. A negative supply shockb. An increase in inflationary expectationsc. A positive supply shockd. All of the above
The short-run Phillips curve trade-off implies that if the curvea. shifts over time, society must accept decreases in unemployment for decreases in inflation.b. is stable, society must accept
Most economists today believe that the Phillips curve isa. downward sloping in the short run but vertical in the long run.b. vertical in the short run but downward sloping in the long run.c. upward
At the natural rate of unemployment, the long-run Phillips curve isa. horizontal.b. upward sloping.c. downward sloping.d. vertical.
What is the difference between the long-run and short-run Phillips curves?
Is the Phillips curve stable over time?
How reliable is the Phillips curve?
For a given upward-sloping short-run aggregate supply curve, how does an increase in aggregate demand correspond to a movement up and to the left along a Phillips curve?
What is the argument for why the Phillips curve is relatively steeper at lower rates of unemployment and higher rates of inflation?
How does the change in real wage rates (relative to output prices) as inflation increases affect the unemployment rate?
How does the rate of inflation affect real wage rates if nominal wages rise less or more slowly than output prices?
Which of the following is consistent with a movement along a short-run Phillips curve?a. A decrease in the inflation rate with no change in unemploymentb. A decrease in unemployment with no change in
If the Phillips curve is steeper at higher rates of inflation, it suggests thata. once the economy has relatively low unemployment rates, further reductions in the unemployment rate can occur only by
If policy makers expand aggregate demand, they can lower unemployment ________, but only by _________.a. temporarily; decreasing inflationb. temporarily; increasing inflationc. permanently;
Society faces aa. long-run trade-off between price inflation and unemployment.b. short-run trade-off between inflation and unemployment.c. short-run trade-off between the actual unemployment rate and
How does the Phillips curve relate to the aggregate supply and demand model?
What is the Phillips curve?
Given that the Fed currently imposes reserve requirements on checking deposits, but not on savings deposits, why would banks prefer to hold deposits as savings accounts rather than checking accounts,
Why have ATMs and online banking made savings accounts more liquid than they used to be?
Answer the following questions.a. What is the equation of exchange?b. In the equation of exchange, if V doubled, what would happen to nominal GDP as a result?c. In the equation of exchange, if V
Why can’t the Fed target both the money supply and the interest rate at the same time?
How does a higher price level affect the money market? How does it affect aggregate demand?
In the move from a below-equilibrium interest rate to the equilibrium interest rate, what happens in the bond market and the loan market? In the move from an above-equilibrium interest rate to the
When increased government purchases or expansionary monetary policy does give the economy a boost, _____________________ knows precisely how long it will take to do so.
Policy makers must adopt the _____________________ policies in the _____________________ amounts at the _____________________ time for such “stabilization” to do more good than harm.
Some people believe that monetary policy should be more directly controlled by the president and Congress, so that all macroeconomic policy will be determined _____________________ directly by the
Decision making with respect to fiscal policy is made by _____________________ and _____________________, while monetary-policy decision making is in the hands of _____________________.
The Fed can control deposit expansion at _____________________ banks, but it has no control over global and nonbank institutions that also _____________________.
Ordinarily, banks want to convert excess reserves into interest-earning _____________________, but in a deep recession or a depression, banks might be hesitant to make enough loans to put all those
In the process of calling in loans to obtain necessary banking reserves, banks _____________________ the supply of money.
According to the Federal Reserve Bank of San Francisco, the major effects of a change in policy on growth in the overall production of goods and services usually are felt within _____________________
The lag problem inherent in adopting fiscal policy changes is much _____________________ acute for monetary policy.
The inflation rate tends to rise _____________________ in periods of rapid monetary expansion.
Higher rates of anticipated inflation would tend to _____________________ velocity.
An increase in the interest rates will cause people to hold _____________________ money, which, in turn, means that the velocity of money _____________________.
Velocity is _____________________ stable when measured using the M1 definition and over shorter periods of time.
Some economists, often called _____________________, believe that monetary policy is the most powerful eterminant of macroeconomic results.
Expanding the money supply, other things being equal, will have a similar impact on aggregate demand as _____________________ government spending or _____________________ taxes.
If M increases and V remains constant, then P must _____________________, Q must _____________________, or P and Q must each _____________________.
_____________________ represents the average number of times that a dollar is used in purchasing final goods or services in a 1 year period.
The quantity equation of money can be presented as:_____________________ 5 _____________________.
The Fed selling bonds will lead to a(n)_____________________ in the money supply, a(n) _____________________ in interest rates, a(n) _____________________ of the dollar, a(n)_____________________ in
Countercyclical monetary policy would _____________________ the supply of money to combat a potential inflationary boom.
The real interest rate is equal to _____________________ minus _____________________.
A contractionary policy can be thought of as a(n)_____________________ in the money supply or a(n)_____________________ in the interest rate.
The _____________________ is the interest rate the Fed targets.
When the economy grows, the Fed would have to _____________________ the money supply to keep interest rates from rising.
If the demand for money increases but the Fed doesn’t allow the money supply to increase, interest rates will _____________________, and aggregate demand will _____________________.
When the Fed sells bonds, it _____________________ the price of bonds, _____________________ interest rates, and _____________________ aggregate demand in the short run.
An increase in the money supply will lead to _____________________ interest rates and a(n)_____________________ in aggregate demand.
Rising national income will shift the demand for money to the _____________________, leading to a new _____________________ equilibrium nominal interest rate.
Money market equilibrium occurs at that _____________________ interest rate where the quantity of money demanded equals the quantity of money supplied.
We draw the money supply curve as _____________________, other things being equal, with changes in _____________________ policies acting to shift the money supply curve.
If the price level falls, buyers will need _______________ money to purchase their goods and services.
The quantity of money demanded varies _____________________ with the rate of interest.
An increase in the money supply would tend to _____________________ nominal GDP.

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